JF2607: From the Music Industry to Multifamily with Rich Frierson

With a background in music producing, Rich Frierson decided to go into real estate when he saw the profits he was capable of earning. Now, he’s the go-to for many others in the music industry. Rich is discussing how he balances his relationships with lenders and owners alike, how he is able to buy these properties on short sales, and his expectations for what the multifamily market might bring in 2022. 

 

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Deal Maker Mentoring

TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m with today’s guest, Rich Frierson. Rich is joining us from Washington DC. He is a full-time music publisher and is focused on multifamily in the Bronx and Mount Vernon areas of New York. Rich has acquired a number of properties through short sales.

Rich, thank you for joining us, and how are you today?

Richard Frierson: Man, I feel great. This is a great moment for me, because when I started getting into flipping, this was one of the shows that I would listen to, to just get in the flow of the ideas and the concepts and stuff like that. So I feel really good about being here.

Ash Patel: That’s awesome and it’s our pleasure to have you, man. So before we get started, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Richard Frierson: Sure. So my background is actually in the music business. For several years since I was 16, so from 1994 to 2008, I was a hitman; that’s one of the staff producers for Bad Boy Entertainment. There, I worked on all of their albums that were released from there, from the No Way Out, Diddy album, Press Play, all the Diddy’s albums there.  Notorious B.I.G., Faith Evans, The Lox, Mase, all of those great records.

Ash Patel: All the East Coast legends.

Richard Frierson: Yes, yes, yes, yes. Now, I worked with some West Coast guys, too. I got to work with Ice Cube, which was a great experience, and I also worked with DMX, Beyonce, Jay Z, Lil Wayne and so many others.

Ash Patel: Alright, so you know, this is a real estate show, right?

Richard Frierson: Right. Right, right.

Ash Patel: How did you get into real estate, man? It sounds like you had a great career…

Richard Frierson:Oh, man. Great.

Ash Patel: You’ve had a lot of fun…

Richard Frierson: Listen, great career, I couldn’t have dreamed of a better experience. But luckily, a lot of music people, they go through the cycle of success and go to different things, and an older mentor of mine, he was into real estate and he recommended that I look into flipping houses; and it went in one ear and out the other. And then one day, I just happened to be with him, and he had a closing, he made $300,000 off of this one deal. And after that, I was like, “What the hell is this?” Like, “Where do I sign up?”

And I actually found that because of my music industry experience, there was a lot of good things I had. I had some advantages to getting houses, and that was because in the music business, we go through a cycle of success. One year, we’ll make $1 million, but the next year, we’ll make $800,000. But sometimes we’ll still spend like we made the million dollars, and then after five years of that, you just get in a jam.

So I found that there was like a little market of high-end homes from people that were in the entertainment that ran into trouble. So I decided to become a short sale specialist.

Ash Patel: How much did you capitalize on that?

Richard Frierson: Oh, man. Listen, one thing that’s cool about music people is they understand transactions with high money upfront. So I would work out deals with them where I would give them some money to take over the property and then negotiate the short sales. And these were super high-end properties, and I was able to work out with the bank, some really low buys. So I’m really happy about that.

Ash Patel: So Rich, let’s go through one of these examples. You’ve got an artist who overspent on a house, can’t afford it… Do they come to you? Or do you already know this is going on?

Richard Frierson: I put the word out. And a lot of times, their accountants will come to me, or their attorneys; it wouldn’t necessarily be them, but they’ll be like, “Hey, you should talk to Rich about this, he might be able to help you.”

Ash Patel: Like, “They can’t afford this, you need to go help them out.”

Richard Frierson: Right. And a lot of times, it may not even be that they can’t afford it but it’s like divorce is a big thing. You know, divorce happens and once the main person leaves, the wife can’t afford it anymore. So then they’ll bring me in so I would come in and try and figure out a win-win situation for all of us.

Ash Patel: Do you approach the lender?

Richard Frierson: Yes.

Ash Patel: So you obviously have to have a conversation with the homeowner. So you’ve got to win them over on your solution,—

Richard Frierson: Straight up.

Ash Patel: —you’ve got to get the permission to go to the lender. What does that conversation look like, with the lender?

Richard Frierson: With the lender?

Ash Patel: Yes.

Richard Frierson: Okay, so with the lender, it’s just like any other short sale; you have to prove why the house is worth what you want to pay for. Especially nowadays, these guys are smart; this is not like 2010 or something like that, where they’re just taking anything. They want the top dollar. So you have to prove why the house is worth that. And that is a lot of fighting their BPOs, a lot of taking it up to the different managers, and you’ve got to have some paperwork in hand, you’ve got to have some appraisals, you’ve got to have as much paperwork as you can. But the good thing about it is, there usually is something wrong with every house, if you look hard enough.

Ash Patel: And what are examples of things that you find wrong? Is it the roof? Is it structural? Is it—?

Richard Frierson: Yes. Structural, roofs, mold…

Ash Patel: Okay. So you present some evidence.

Richard Frierson: Yes. I have one of the best home inspectors on my team. This guy, he’s certified nationally, which I recommend anybody flipping houses – you may do this, but have somebody on your team that does that, that that’s their lifeblood, and he can find everything that’s wrong. And sometimes, like this one house that I did, the guy had a balance with the bank for $2 million. And I was able to buy the house for about $540,000. Now, you say, “How in the world did you do that?” Right?

Well, it just so happens that there were, like, rocks. The way it was built, it was carved out from a mountain top, and the house was kind of too close to the rocks. Now, I’ll be honest with you, that’s nothing that’s going to cause damage to the house, but it could. And it’s like, against what it’s supposed to be in that particular town. So you have to look for that stuff. So we looked for it, we found it, and then we found how much it would cost to remedy that situation, which was not a small fee. And then we showed them, “Hey, this is why we should spend this amount of money.” And they’re not going to just roll over and take what you give them at the beginning, but keep on getting in there, be persistent and eventually, they’re going to want to make a deal. That’s how it works out.

Ash Patel: Rich, throughout this time, is the homeowner continuing to make payments?

Richard Frierson: No.

Ash Patel: Okay. Because if they were making payments, the bank would not be interested in a short sale.

Richard Frierson: Oh, if they were making payments, there would be no conversation. So they have to stop making the payments.

Ash Patel: Okay.

Richard Frierson: And that is something that is hard to swallow to some people, to some homeowners.

Break: [07:52] to [09:25]

Ash Patel: So a lender now has a property where they’re not getting paid on, and they have this overwhelming fear that all these things are wrong with the house. And you come in there, and what’s your typical discount percentage over fair market value?

Richard Frierson: That I present to them? I present to them that I’m getting maybe 20% to 25% of a discount; but in reality, I’m making sure that it’s way lower than that. It’s depending on the type of team you’ve got, that can do the work… You know, you can get things done for cheaper.

Ash Patel: Are these local banks, big banks?

Richard Frierson: Big banks.

Ash Patel: All the big boys, huh?

Richard Frierson: The big boys; going at the Bank of America’s, the Chases. There’s just so many of them.

Ash Patel: And do they ever come out to the property and look, or is it all on paper?

Richard Frierson: It’s all on paper. I mean, they send out their BPOs. So it works like this – they’ll send out exterior BPO agent, and—

Ash Patel: What’s a BPO?

Richard Frierson: A BPO is a Broker’s Price Opinion. So that’s where an agent will go out there and give their opinion on what the house is worth. So that’s what they’re going to do first. They’re going to send out an exterior BPO. Immediately, I’m like, “Get out of here.” They don’t know anything about the property; there’s issues wrong with the property, they’re not qualified. So then they’ll send some interior BPO; same thing, knock it out. I’ll trump it with a home inspection report. So then they may escalate it to where they get like an appraiser out there. So then I’ll send them an appraiser from my end. And then I’ll send them an engineering report; all of these things that are certified, that they can’t deny. And from there, once they see all of that, they’ll usually start negotiating, because it’s in their best interest to let this problem property go.

Ash Patel: You have a fair amount of time and money at this point tied up in this. What percentage of the times do you win the deal?

Richard Frierson: Well, you know what? I would say this – I always win the deal. I may not win the deal as much as I want to. So I’m going to say that. But I’m always able to work out something reasonable. I may not get a home run like that one I just talked about, but I’ll give it to around 30%, that’s just average. I’ll get around there sometimes, which to me is not necessarily a home run. But I will never lose on any of these properties.

Ash Patel: And then Rich, from beginning to closing, how much time, on average, does each deal take? Are we talking weeks, months?

Richard Frierson: We’re talking months. Depending on the situation, it could be way over a year. Because sometimes — like we talked about earlier, you mentioned that if you’re paying the mortgage, you can’t go with this. And I’ll just give you an example – there was a lady that I was working with, she was 75 years old; a very proud woman, and she paid her mortgage every single month. But there were so many fines on the property and the town removed her; she couldn’t even live there. And I’m like, “Look, you have to stop paying in order for me to have this conversation to do what we need to do.” And it took like two months to get her to agree to do that, then it took like four months after she stopped paying to be able to talk to the banks. And then it took another four or five months to get them to submit to my will. So it takes a while, it’s a process. It’s not quick to flip, as far as getting some of these properties; but it’s higher rewards.

Ash Patel: And you’ve got to put the time in to wear them out.

Richard Frierson: You have to put the time in.

Ash Patel: Yeah.

Richard Frierson: But the good thing about it is, it’s not a consistent—like, it’s not like I’m on the phone for eight hours a day.

Ash Patel: Right.

Richard Frierson: But you have to continuously call. And if you build a system which you need to do this continuously, you’ll have somebody in that position to just call and check on things, and make sure they’re getting what they need to have.

Ash Patel: And Rich, do you end up closing on these, or do you wholesale the deals?

Richard Frierson: I close on them. I go all the way.

Ash Patel: And then what do you do?

Richard Frierson: Rehab them.

Ash Patel: Live in there for a couple of weeks and enjoy it?

Richard Frierson: I wish I could live in them, but my wife would not have it. But I rehab them and then put them on the market.

Ash Patel: And then how do you find buyers? Is it within your network, or just marketed like normal?

Richard Frierson: No, just marketed like normal. The market is still hot where there’s buyers out there. So if you have a quality product, somebody would pick it up quickly.

Ash Patel: Is there a geographic area that you focus on? Or will you do this anywhere?

Richard Frierson: I will do this anywhere, but the areas I focus on are New York, Westchester primarily, and Atlanta, Georgia. And the reason why is because I have teams of contractors in the area that I can depend on.

Ash Patel: And what other asset classes are you working on besides single families?

Richard Frierson: Multifamilies, those that I hold. And I also mainly hold those in the Bronx or Westchester, New York, because I have a team to kind of take care of that when I’m not around.

Ash Patel: And did you take those down with a short sale also?

Richard Frierson: Oh, yeah.

Ash Patel: Alright. So here’s a question everybody’s wondering. Multifamily is so hot. How do you go to a bank and get them to short sale it?

Richard Frierson: Oh, man. It has to be a major problem with it, you know…

Ash Patel: And how do you also find operators that are struggling in multifamily? Is it the same thing, you use your network, or do you find other ways to find operators in trouble?

Richard Frierson: There’s a few ways I go. And I recommend for all of the people who flip houses, do not just take one way. But one thing that I do that everybody should do is just think logically; when a person’s in trouble, where do they go? They’ll go to the doctor. So if a person is in trouble, they go to a bankruptcy attorney, or they go to a credit repair specialist. And then you create relationships with those people, so that you can be an option for them to recommend you to help a person in trouble.

Ash Patel: That is great. Do you have a good example of a multifamily and numbers that we can run through and follow along?

Richard Frierson: Oh, man. All right. So this is actually an example of that is going on right now. This actually is not a short sale but this is, I guess, something that you can find because of the times that we’re in right now.

So I got a call—because I’m at a point where I’ll finance other people to do deals, too. If the deal looks good enough, I’ll put up the money for it, and we’ll do a JV. And I got a call about a deal… This guy, he needed some creative financing, and what it was – he’s 65 years old, he’s not working, he owns a three-family home in New York, in the Bronx. They just told me the area, I didn’t even see the home, and I knew what it was worth. I just know my areas. So it was worth about 750k, and he only has $150,000 left on the mortgage. But he’s not working, and you can’t get—you can’t refi without a job. And he has a three-family and his tenants have not been paying, and they’re not helping him signing the paperwork necessary to get money from the government. So he hasn’t been paying the mortgage for two years, and there’s work that needs to be done; he has no choice.

So in a situation like that, I come in, and I try and make it fair, I want to make it fair for everybody by working out a reasonable number, which will probably be maybe $350,000 or $400,000, so he can have some money to do what he needs to do, and pay off the property, and then I’ll get the people out of there.

I’ve had a lot of experience — with short sales, you have a lot of experience with people who don’t want to leave. So I have a great legal team on that end that can help me expedite the process of getting them out of there, and start all over again. But a lot of opportunities come through weird situations. And what I do and what I tell my little mentees to do is we have to become specialists, become doctors; we’ve got to be able to diagnose the problem and try and help them make the best of the situation. And through that, I continue to win.

And before I even offered that guy the deal that we were going to do, I tried to see if there was any way I can help him save it without me getting involved; even though I knew it’d be like an easy win for me, it’s really sad that these tenants put them in the situation, and just because he’s not working, he’s not able to make any other moves. So that sucks.

Ash Patel: Yeah, good for you for taking that approach and trying to do the right thing initially.

Break: [18:16] to [20:56]

Ash Patel: I would imagine with all of these eviction moratoriums, there’s going to be a lot of pain going around there for multifamily owners.

Richard Frierson: Yeah.

Ash Patel: Yeah. What options would somebody like that have? Can they just go to their own lender and say, “Hey, listen, can we get a reset? Can we start over? What options would a typical multifamily lender have?

Richard Frierson: The lenders wouldn’t do that, because there’s no job. So they don’t see how the money can be brought in. They need to see some type of income coming in. So I go, “Look, man, I can give you a job if you pay the taxes on it.” You know, what I’m saying? [Inaudible [21:34] thought of a situation that way. I always, say, well, maybe a situation if they have somebody they can trust to kind of buy it through a corporation and be able to reset it that way… Because this is a ton of equity, so if you have somebody with decent credit on your side and a few dollars to spend on closing costs, there’s different moves you can make. But the banks, what they’ll do right now is they’ll delay it as much as possible, and that’s a cool thing. But they, as of late, they’re cutting people off, when the time is up. People are going to have to start producing for these banks.

Ash Patel: Are you seeing a lot more opportunities in the pipeline?

Richard Frierson: No, not yet. Everything is still pretty consistent.

Ash Patel: Do you think it’s coming?

Richard Frierson: It has to come. But how it comes – I’ve been thinking about this, because people… They’re going to have to live somewhere. And the banks are not set up to do deals with everybody at once. Even if there’s short sales or foreclosures, they’re not set up to go at everybody at once. So there’s got to be some easing into it.

And as far as the market, some people talking about the prices go down – I don’t think that’s going to happen either. I think that because of the price of wood, and everybody’s just charging more money for everything, I think that the prices may stay consistent, but we may have some more activity as far as people buying and selling. But I’m interested to see… In the meantime, I’m trying to make sure that I stay strict within my margin. So if there are changes, I won’t get caught holding the bag when the music goes off.

Ash Patel: So you’ve done single families, multi families… Have you thought about doing non-residential commercial?

Richard Frierson: I have. People spoke to me, but I’m just not that familiar with it, and I haven’t spent the time to really learn that yet.

Ash Patel: You know, a great transition is buying a mixed-use building; so commercial on the bottom, residential on top. And the reason I love those is because commercial guys hate the residential aspect of it. The residential guys don’t want to deal with the commercial part of it. So it’s an asset class that falls between the cracks, and it’s a great way for residential experts to get into the commercial realm without taking a whole lot of risk, right? Because often, the apartments will pay for the majority of your expenses of mortgage. So I would chase those. And lenders don’t like them at all. Most big banks will not finance a mixed-use building. They hate them, for whatever reason. They just don’t fall into any category. So if you’ve seen any of those, I would chase them as well.

Richard Frierson: Okay, I’ll have to start doing some research into it.

Ash Patel: Yeah, mixed-use buildings. And that’s for any of the Best Ever listeners that want to dabble into commercial – it’s a great way to dip your toes in the water and get into that commercial realm.

Richard Frierson: Yeah, I’m going to have to check that out.

Ash Patel: Rich, what is your best real estate investing advice ever?

Richard Frierson: My best real estate investing advice is try and help people first. We know you want the deal. I want the deal. But we deal with people who are in trouble. They come to us – it’s not because they want to be there. So it’s very important to have empathy, and a person that you actually help stay in their home is worth 20 people whose house you bought, because they’re going to tell everybody, and then you’re going to be their go-to person that people come to for help. And the truth is, everybody can’t be saved. Some people are just too far gone. But you show them that and then they’ll have no choice. But if you just automatically tell them that from the rip, they’re going to be hesitant, because it is a very sensitive space. So I would say, just try and come from that area, and you’ll win.

Ash Patel: That is awesome. Rich, are you ready for the Best Ever lightning round?

Richard Frierson: Let’s do it.

Ash Patel: Let’s do it. Rich, what’s the best ever book you recently read?

Richard Frierson: Oh… Oversubscribed. That is a great book.

Ash Patel: What was your big takeaway from that?

Richard Frierson: That I’m doing everything wrong. [laughs] No, no… My biggest takeaway from that is that every single thing is a process, and you have to create the atmosphere that you desire for people to come in and do business with you on your terms.

Ash Patel: What’s an example of something that you had a huge pain point on, that you systemized?

Richard Frierson: It’s funny, because it’s so little, but it was a big pain point… When I first started, I did all types of marketing. One of the things I did was that was actually effective, but illegal, was the bandit signs. A lot of times older people would probably call a bandit sign before they see it on the internet. And I hated doing that; wake up early and run away from the cops, or something like that… And I was able to build a team that will go up there and put it up for me. [laughter]

Ash Patel: That’s awesome. Rich, what’s the best ever way you like to give back?

Richard Frierson: The best way I like to give back—every year for my birthday, I try and help out the homeless with care packages. And that’s something that I started doing, and now I include my kids in, and we just try and give a little hope, a little love, because we know that we’re extremely lucky. So that is one way I always give back.

Ash Patel: That’s great. Rich, how can the Best Ever listeners reach out to you?

Richard Frierson: Man, you guys can find me on Instagram at @RichYounglord. Younglord is my producer name back when I was with Bad Boy. So you can find me at Rich Younglord; or you can go to my website, which is www.10flipcommandments.com. There, I talk about my commandments that I live by to make sure I don’t lose any money on deals. So you can come by and check that out. Or you can just go to any social media, it’s Rich Younglord across the board.

Ash Patel: Rich, I want to thank you for being on our show today. What an amazing story, from coming up in the music business to having that mentor that did real estate that caught your attention, and what a unique business plan that you have. So thank you for sharing all of your knowledge today with us.

Richard Frierson: Well, thanks for having me. Like I said, I feel really good, because I listen to you guys, and I always get great information and great ideas, and just confirmation that, as flippers, we’re doing the best we can, we’re doing the right thing.

Ash Patel: Yeah. Awesome, man. Thank you again. Best Ever listeners, thank you for joining us, and have a best ever day.

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